Over 50 per cent of all start-ups collapse before their first birthday. Despite this fact, many business operators do not put in place safeguards to ensure business survival. However, experts say a big number of failing enterprises could be saved if the owners embraced prudent management practices, among others.
According to Stanley Mukasa, the in-charge of the entrepreneurship programme at Akilah Institute of Women in Kibagabaga, the mortality rate of start-ups is increasing because education institutions and practitioners do not provide relevant skills or support to help them manage their businesses well and ensure they grow and become sustainable.
“Another challenge is that start-ups want to operate like already established firms because they aren’t conversant with how to run young enterprises, which leads to failure,” he says.
Mukasa notes this is a big challenge that has thwarted chances of the start-ups to flourish and become sustainable. Peace Uwimbabazi, a Kigali-based financial expert, says the main reason behind business failure is that most entrepreneurs focus on profit generation not business growth.
“When one set up, say a pre-school project, they envisage ‘big profits’ in terms of school fees. However, when the project fails to bring in good returns in the initial stages, they close up the school or sell it,” she says. Uwimbabazi adds that start-ups collapse during their earlier stages of life due to the fact operators do not serve customer needs.
Julius Zigama, the in charge of sales at I&M Bank, Remera branch, says some entrepreneurs misuse the money generated by the business or channel it to other activities that are not related to the enterprise. “Some people get bank loans to start businesses and use the money to do different projects for it was not planned or worse still, spend it on luxuries,” he says.
Joseph Sibomana, an entrepreneur and financial expert based in Kigali, advises start-up operators to do research before opening shop, noting that this (research on type of business) could influence its survival or failure.
Sibomana says research is particularly crucial as far as target market and location are concerned because “one should start a business to serve a need not because they want to be seen as business owners”.
“Business operators should also be driven by the purpose of the particular type of enterprise, rather than focusing only on making money. That’s why it is important to teach entrepreneurship students skills that strengthen management,” he adds.
He says there is need for mind-set change, arguing that some people start enterprises but do not think or act like entrepreneurs. Sibomana adds that one should have a plan and set goals, indicating clearly how they will achieve those goals. “This will guide you toward realization of your business goals, milestones and dreams.”
According to Uwimbabazi, getting customer feedback and working to solve their grievances is one of the strategies that promote business growth and survival.
Zigama advises business operators to always avoid using money generated by the venture for things that do not support it.
Coming up with a monthly budget including all expenditures, credits, debts as well as savings will ensure that entrepreneurs monitor how their money moves, he adds.